Trade Deficit Surges to a Record High

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

WASHINGTON — The trade deficit in America surged to an alltime record of $764 billion in 2006, the Commerce Department said yesterday, as high oil prices increased the nation’s import bill and as American consumers continued loading up on products churned out in factories from China to Mexico.

The deficit figure, while widely expected, ratcheted up tensions over trade policy in Washington. President Bush has asked Congress to extend his authority to negotiate free-trade deals with other countries. On Capitol Hill, many of the Democrats now in control eye that request suspiciously, and their leadership has vowed to oppose new trade deals unless they include enforceable labor and environmental protections.

In a letter sent to Bush as the deficit figures were released, House Speaker Pelosi, Majority Leader Steny Hoyer, a Democrat from Md., and Senator Charles Rangel, chairman of the powerful Ways and Means Committee, called for “a fundamental shift” in American trade policy. They asked the president to submit within 90 days an action plan to shrink the trade deficit by removing barriers to American exports and eradicate trading practices they regard as unfair.

The letter put particular emphasis on pressuring China, the country at the center of American trade tensions, to halt alleged unfair practices such as keeping its currency, the yuan, artificially low. The Commerce Department numbers provided new ammunition in this campaign: The trade deficit in goods with China reached a new record of $233 billion for 2006, the Commerce Department reported, an increase of more than 15% over the $202 billion logged in 2005.

Manufacturing groups accuse China of manipulating its currency to make its goods unfairly cheap on world markets. China asserts that is has been made a scapegoat for the decline of American manufacturing. Many of China’s exports are produced in factories owned by American firms for shipment to American stores, a trade expert at Nanjing University, Zhang Erzhen, said.

Mr. Zhang echoed contentions from Beijing that China’s trade surplus with America would be far smaller if Washington relented on national-security restrictions that bar Chinese companies from purchasing a range of American-made high-technology goods.

But despite the yawning gap, the trade figures for the year confirmed a new trend that the Bush administration has cited in its bid for expanded trade pacts: For all of 2006, American exports grew faster than imports, slightly limiting the growth of the overall trade deficit.

“That’s a new thing and it’s very welcome, but it’s insufficient,” the legislative policy director at the AFL-CIO, the nation’s largest federation of labor unions and an opponent to new trade pacts, Thea Lee, said. “We still saw an almost $50 billion increase in the deficit. It reinforces the magnitude of the challenges we face trying to get our trade relationships back in balance.”

The administration has been able to negotiate trade deals and then submit them to Congress for a simple up-or-down vote without amendments, but that so-called “fast track authority” is set to expire at the end of June, leaving uncertain the fate of completed but not-yet-approved pacts with Peru, Colombia, and Panama.

Critics of the administration’s trade policy pointed to the record trade deficit in calling for Congress to deny the president the extension.

“If President Bush deserves blank-check trade negotiating authority from Congress with this record, then Paris Hilton deserves to be Girl Scout of the Year,” a research fellow at the U.S. Business and Industry Council, which argues against the administration’s trade policies , Alan Tonelson, said.


The New York Sun

© 2025 The New York Sun Company, LLC. All rights reserved.

Use of this site constitutes acceptance of our Terms of Use and Privacy Policy. The material on this site is protected by copyright law and may not be reproduced, distributed, transmitted, cached or otherwise used.

The New York Sun

Sign in or  Create a free account

or
By continuing you agree to our Privacy Policy and Terms of Use